Shesa's JANUARY 2024 Investment Blog

 By Shesa Nayak

U.S. Stock Market Updates 

Wishing all my blog readers a VERY HAPPY and PROSPEROUS NEW YEAR-2024! I wish all of you a wonderful and profitable year 2024!!

 

After having a brutal 2022, stock market bounced back with a vengeance in 2023. The Christmas came early for investors on 13 December – in the form of dovish tone from Federal Reserve. The FOMC indicated that they expect three rate cuts in 2024, four times in 2025, and three more times in 2026. The stock market roared, NASDAQ was the star performer, up 43.4%, S&P 500 rose 24.2% and DOW was up 13.7% for the year. Moreover, Nasdaq 100 was up humongous 55%. For Nasdaq it was the best year in two decades since 1999 .com boom. Last year’s rally can primarily be attributed to “AI driven rally” and Nvidia was the star performer rising 239% for the year. By the way, Nvidia has risen 64,000% since its IPO since 1999.

Quick Recap of 2023: In a nutshell, the whole year primarily revolved around Federal Reserve  and Artificial Intelligence (AI & Generative AI). The year kicked-off with a bang and stock market had one of the best January. However, we saw a downturn from February to March 6th. Subsequently, market  gained momentum ignited by generative AI wherein Nvidia blasted Wall Street earnings expectations and increased next quarter revenue guidance significantly.  After a huge run, stock market again got hammered in August till the end of October. Nasdaq went to a correction territory losing around 12% of its value. Then came a wonderful November where S&P 500 gained 9% and Nasdaq gained 11%. However, market rally was mostly restricted to the magnificent seven stocks (Apple, Microsoft, Nvidia, Tesla, Amazon, Google, Meta) and few others. In December when Wall street realized that FED is no more a threat, we saw widespread rallies in the last few weeks of the year and all stock indexes ended with a bang. 

Federal Reserve and Economy: The Federal reserve raised interest till July 27, 2023. The CPI and PPI kept falling and employment numbers started decelerating. It’s wonderful to see that consumers are still spending and that has kept U.S economy well and alive. As we know, consumer spending constitute 68% of U.S GDP. We saw nice GDP growth for U.S: Q1: 2%, Q2: 2.1%, Q3: 4.9%, Q4 GDP is expected to be around 2.6%. The US households still have an estimated $400 billion in excess savings remaining from 2020-21 stimulus program! And the stock market got what it was expecting from Federal Reserve, probably in the form of Santa Clause :):. 

So, what can we expect in 2024? Well, worst of inflation  is behind us but mild-recession in second half of the year and interest rate cut by Federal Reserve are very much on the card. In my view, the stock market should continue to do well in 2024. Undoubtedly, stock market had a wonderful 2023. However, if we revisit last 2 years then overall stock market is still down, except DOW. I also expect that the stock market would become very volatile in the later part of this year as we approach 2024 U.S presidential election. But election years are overall good for the stock market. So, what should we expect from the stock market and which sectors should do well? I have done some research and will elaborate my thoughts but before that let’s have a glance to the stock market index. 

Indexes	Close FRI 12/30/22	Close FRI 12/29/23	Change in 2023	% Change in 2023	All Time High	From All Time High	% from All Time High
DOW	33,147.25	37,689.50	4,542.25	13.70	36,952.65	736.85	1.99%
S&P 500	3,839.50	4,769.83	930.33	24.23	4,818.62	-48.79	-1.01%
NASDAQ	10466.48	15011.35	4,544.87	43.42	16,212.23	-1,200.88	-7.41%
BTK	5,281.10	5,418.80	137.70	2.61	6,376.77	-957.97	-15.02%
NBI	4,213.13	4,370.58	157.45	3.74	5,517.77	-1,147.19	-20.79%

Economy News

• Interest Rate: 5.5%. 
• GDP: Q4: 2.6% (projected), Q3: 4.9%, Q2: 2.1%, Q1: 2%. Yearly GDP growth: 2.9%.
• Inflation:   3.1% in November better than forecast 3.2%. 
• Producer Price Index (PPI): It’s a measures on the average price changes that businesses pay to suppliers, rose 2.4% for the 12 months ended in October. On a monthly basis, prices declined 0.2%, vs. 0.1% expected by the street. 
• Job growth: US economy added 199,000 vs. 180,000 jobs in November 2023. Unemployment Rate: 3.7%. 
• Consumer Confidence: 69.4 
• U.S Crude Oil: $71.33 a barrel. 
• U.S Dollar Index: 101.38.
• U.S Treasuries: 2 yr: 4.25, 5 yr: 3.75, 10 yr: 4.5%, 30 yr: 4.75. 
• Retail Sales: 0.3% vs. -01% expected. 
• US Mortgage Rate: The 30-year fixed-rate mortgage averaged 6.61% as of Dec. 28, down from 6.67% a week earlier.

A quick word about my Portfolio in 2023

I do not want to discuss about my personal portfolio but it was good to see beating S&P 500 handsomely despite a terrible year for renewable energy stocks.  Overall, my portfolio did pretty well in some part and lackluster in other part. The losers were mostly green energy stocks which performed the worst viz. Fisker (FSR), STEM, PLUG, Luminar (LAZR), Enphase (ENPH) and so on. The key winners were Carvana (CVNA), NVDA, Broadcom (AVGO), SOXL, TSLA, Adobe, FBIO, FLNC, Amazon, Google, Microsoft, TQQQ, Intel (INTC) to name a few. I am revisiting my portfolio to do little more due diligence and to mitigate some risks.

So, what can we expect in 2024?

Accommodative Fed: Since inflation is subsiding and Federal Reserve has hiked enough interest rate, the FED would start cutting interest rate this year. As I stated before, FED is projecting three interest rate cuts in 2024, three in 2025 and two in 2026. If the economy tilt  towards a recession then we may see more rate cuts but if economy remain robust then we may see fewer cuts. Also, it’s an election year, hence Fed may be little more careful. Though Federal Reserve is an independent body but many times it gets influenced by the government action. Hence, we may see a soft landing scenario. Once Fed starts cutting rates we may see further momentum in the stock market. 

U.S. Election 2024: I expect that stock market should continue its momentum on 2024 though we may see lot more volatility in the second half of 2024 due to U.S election which is expected in November 2024. The stock market may be volatile and tend to move one way or the other way depending on which government (Democrat or Republican) will form the government. The stock on their respective priority sectors should do well. But until the counting is over, nothing can be predicted with surety, hence volatility increases around the election time. Furthermore, with the anticipation that the new government should do more constructive work the stock market usually do well. Since last five election this is how S&P 500 has performed: 

2004: 11%

2008:  -37%

2012: 16%

2016: 12%

2020: 18% 

2024: ???

According to Yardeni Research, the S&P 500 has climbed an average of 6.2% in the election year since 1932. 

Economy: U.S economy should keep doing well but I do not think it would be as robust as 2023. The inflation should go down further, unemployment may rise, manufacturing recession may continue, corporate earnings may slow but steadily pick up as year progress. Due to high credit card debts consumers spending may go down. Considering the trends of declining inflation, rebalancing labor market dynamics, decreasing bond yields, an easing Federal Reserve policy, strengthening economic activity, and promising AI demand signals, I anticipate positive medium- and long-term trends for the stock market. 

Inflation: Assuming the current pace of disinflation persists, then inflation will fall back to 2% by summer or before. Once inflation hits 2%, the Fed is expected to start cutting rates and reinvigorating the economy. But as an investor we also have to think “what if the inflation comes back” or what if the economy gets into recession?

Consumer Spending & Recession: US Consumer credit card debt has gone to  about $1.08 trillion as of Nov 7, 2023.  The savings are drying up. The bottom 80% of American households by income have less in savings today than they did before the pandemic. At the same time, banks are once again worried about lending. More than 50% of banks tightened lending standards in the most recent quarter. And bankruptcies are already creeping up. This is what I see as one of the major risk for 2024. Because when consumer have lots of credit card debt and they start paying 20% interest rate evidently the pinch will be felt! As we know consumer spending constitute 68% of U.S GDP. The consumers have kept the U.S economy well and alive. Hence, this may be an area of concern of 2024. Would this result in recession? Difficult to say but can’t be ruled out..

Earnings: The earnings growth are expected to accelerate in 2024. Currently, analysts are projecting earnings growth of Q1: 6.8%, Q2: 10.8%, Q3: 9.0%, and Q4: 18.2%. For the whole year earnings projection stands at 11.8%. The revenue growth for 2024 is expected to be around 4%. This is a good sign for the stock market.

Artificial Intelligence will boost productivity: According to McKinsey and Yardeni research, AI is expected to boost corporate profits across the board somewhere between 15% - 25%. Yardeni believes that the productivity growth will lead to strong economic growth throughout this decade. That should in turn result in a resounding stock market. But we should not get carried away because always there will be volatility and some pullbacks are imminent in the stock market. The impact of AI would demand more investment in the data-center and PC markets. New AI servers, AI PCs, huge server and PC upgrade cycles are expected this year.

What type of stocks should do better in a rate-cut environment? Over a longer timeframe, the strength of the economy drives the stock market based on earnings. But in short term, stock market and the economy often move in opposite directions. Because Wall Street likes to push stock prices with the anticipation of future economic conditions. However, if the earnings do not support in future then market pulls back. Under the interest rate cut environment it’s great for the growth stocks. Because the growth companies (small and medium) would be able to get finance easily without paying too much interest and grow faster and bigger than other large caps. So, money starts rotating from large cap, dividend stock, conservative stock to growth stocks. We already started seeing this rotation since last FED meeting on December 13. 

Trillions of Dollar sitting in the sideline: The last estimate showed $5.6 trillion sitting in the money market. Once the market start picking up those money will start flowing to the stock market and that may fuel further rallies.

Sectors and stock to watch

It’s expected that those magnificent 7 stocks should continue to do well but can’t expect the replication of their 2023 performances.

Technology: Many technology stocks should continue to do well. We may see continued investors interest in AI, software, semiconductor stocks as IT budget ramp up in early 2024. We may also see PC upgrade ‘supercycle’ and uptick in gaming activities. These should help chip/semiconductor sectors  to continue their momentum. Generative Al should see major capital-spending among cloud providers, enterprise and continued data center growth. GPUs should see the great benefit of such spending. As we see more enterprise spending on servers, AI networking, cloud security companies could benefit in 2024. There seem to be rebound in the PC market after a historic slowdown during pandemic. The industry is set to start potential refresh cycle emerge from Windows new OS with some AI embedded.  The transition to 5G and shift to higher-end phones will likely drive greater dollar content and average-selling price gains for smartphone semiconductor. Having said that, last year was the year of chip companies due to generative AI, I think this year would be year of AI software. 

AI Small/Mid Cap: We saw the first innings of AI run this year. However, this is not a coincidence or hype. We should see the second innings of AI growth in 2024. It should be the year of small and mid cap companies because those are growing and still much cheaper comparing to large cap. In addition, Federal Reserve won’t be raising interest rate rather it’s expected to cut interest rate 3-4 times in 2024. This would help small/medium companies to ease their financial situations. 

Real Estate: Higher interest is the killer for real-estate and big items purchases viz. vehicles, expensive furnitures, appliances and so on. However, higher interest rate seems to be behind us. Going forward, we can expect rate to come down and that should benefit real estate, vehicle sales and other companies like Home Depot, Lowes etc. Real estate should be one of the major beneficiary of interest rate cut. 

Selective Renewable Energy Stocks: It has been a couple of years these stocks have been decimated. In 2022 they got hit due to lack of profit. In 2023, they got hit due to higher interest rate and higher cost of landing further deteriorating earnings and revenue. In 2024, I do expect a better future because of following factors :

- The Inflation Reduction Account (IRA) was passed in 2022 but hardly any fund has been released by federal government. Those money will be released in phases during 2024, so that should help strengthen the green energy stock as they need funds for their growth. 

• Interest Rate is expected to come down and that would help not only these green energy companies for easier financing but also help its consumers and suppliers.
• This sector was a target for hedge-funds and short seller to meant money. So, we may see further short covering that should help these stocks. We don’t know which government will come and whether these subsidy program will continue after the election. So, those companies who have strong financials should do well and others may continue to struggle. Hence, one must be diligent in investing carefully. 

Stock of my Interest for 2024

First of all, let me clarify that nobody can predict about market with surety. I will be a fool to say, I can predict accurately. Before the beginning of 2023, Wall Street strategist and experts were calling for a down year. But see what happened to the market!! Markets does what it wants to do. But with my due diligence, I am just sharing my thoughts here. As I said, we should be entering into the second innings of the Artificial Intelligence which should see the real growth in my view. Moreover, if there will be interest rate cut then I expect the stocks related to interest rate sensitive parts of the economy sectors such as small/medium technology companies, real estate, large items like EVs, green energy, customer cyclical should do well. In AI we may see migration toward Al software sector from chip though many chip companies  would continue to do well.  Here are the list of stock of my interest:

Strategy for 2024: Every investor should do their due diligence and design their own investment framework. A generic strategy does not work for every one in such a changing market environment and in the era of high frequency algo-trading. It’s big challenge for the individual investors to beat the stock market because big money (institutions) mostly control it. As expected, inflation should come down probably reach Fed’s projections of 2% in March or April. Once it reaches there Wall Street expect Fed to cut rates. Once that happens, we can expect a big stock market rally. But what if street is wrong about the timing and size of interest rate cut? The fact that Fed cuts rates without having a recession would be a great sign for stock market. A combination of Fed rate cuts and without recession stock market has always led to powerful stock market rallies. It happened in 1984-86, 1994-95, 1998-99, and 2019. So, will it repeat in 2024? I think it’s very much on the card. Having said that, as an investor we must have open eye about the possibility of a Federal Reserve disappointment and other micro and macro economic factors. If there is a reversal, we need rethink and rework on our strategy. As  I keep saying, don’t fall in love with any  stock and take profit when time is good. We must see market conditions for what they are, not what we want them to be because we just can’t control the market. Having said all these pros and cons, I do expect that we should have a good stock market in 2024 fueled by interest rate cut, AI adoption and increased corporate revenue and profits. But it will also be volatile market attributed to economic data, earnings and more importantly election 2024. Though, it’s highly likely that we should see the continuation of bull market but one thing is mostly certain that there would be lot of volatility as we approach the election time. Secondly, “what if the inflation comes back” or what if the economy gets into recession? As many of the blog readers know, I am a growth investor and more emphasis on technology sector. Hence, my focus ares will be more on Nasdaq stock.

My final through for 2024

Under the interest rate cut environment it’s great for the growth stocks. Some of the sectors like real estate, green energy, home improvements, big ticket items like Car, Consumer electronics should do well. This year should see further growth in Artificial Intelligence (AI) beyond chips to software side. This may be the area to put money to work. However, if we run into a recession then some of these would suffer. Hence, it’s extremely important to keep eye on the economy and and other unprecedented factors while investing. Because nobody knows for sure what’ going to happen. One must not get carried away thinking that we are in the bull market so every stock will go up everyday. There will be pull backs, or even mild correction. Some sectors will do well, other may suffer. Investing in the leading stock in the leading sector usually provide better on investment (ROI). One must do due diligence and invest in right stock in appropriate time and take profit every now and then. Because volatility will continue and it may become highly volatile nearing the election time. Combined with a soft landing, increased AI spending coupled with higher productivity growth due to technological innovation should see another good year for the stock market in 2024. But let’s not forget to be prepared for any reversal or worst case scenarios!!

Stock of my Interest for 2024

Tesla (TSLA): Not only interest rate cut should further stimulate its EVs but we may also see more progress toward Full Self Driving (FSD) using Dojo supercomputer. The Cybertruck should pick-up, Tesla Energy (Solar & Storage) would be big. It will also ramp up production of its Giga battery factory. The company is also expected to come with upgraded Model Y and Model 3 EVs. We may hear more about xAI.

Microsoft (MSFT): I have included in my current month’s blog portfolio. Pls read. 

Nvidia (NVDA): It was the star performer of 2023. It should continue to do well but certainly the ROI would be less than 2023. 

The following stock should be the beneficiary of growth in AI:

Amazon (AMZN) and Google (GOOG) should be the beneficiaries of continued AI growth in 2024.

One thing to note, all the above stocks have done significantly better this year, so I would not expect the return on investment (ROI) should match in 2024. So what are the other stock that I expect better ROI. Some stocks that I do like may be speculative.

AI Related Software Stocks

• Palantir (PLTR): This stock gained about 180% last year but this one has huge opportunity gain further momentum this year. 
• UI Path (PATH): The stock is up 61% since I included in my blog portfolio but this is still a front runner as AI momentum continues.
• Adobe (ADBE): This stock should continue to be the beneficiary of AI growth as investment moves from AI chip to AI software. 

Real Estate

• Redfin (RDFN): It’s an online real estate marketplace and provides real estate services, including assisting individuals in the purchase or sell of home. It’s one of my blog holding.

• Open Door Technology (OPEN): It buys your home from you through the internet and makes the home-selling process super simple, flexible, and reliable. It uses AI approach in the whole process. The stock had gone as high as $28 in 2021.

Clean Energy/Self Driving (Robotics):

• Fluence Energy (FLNC): This is an AI enabled Software company for renewable and storage product which is firing on all cylinders and should continue to do well in 2024.
• Luminar Tech (LAZR): This company has tremendous potential but had a very rough 2023. Let’s not forget that this company has/had 85% revenue growth in 2023 and expects to reach a positive gross margin in Q4 2023. Watch for this stock in 2024!
• Aurora Innovation (AUR): Aurora is one of the world’s leading self-driving company. It has all solutions for self-driving - hardware, software and data services together. 
• Enovix (ENVX): Designs, develops, and manufactures lithium-ion batteries based in Fremont. It expects start producing batteries starting this year and go into mass production later this year or next year. 
• Quantum Space (QS): Engaged in development and commercialization of solid-state lithium-metal batteries for electric vehicles and other applications. We should see first use of its battery for EV starting this year.

Chip and Semiconductor

Other than Nvidia, I like few other companies:

• Broadcom (AVGO): has gone up almost 100% but still has potential.
• Intel (INTC) => Included in my this month Blog portfolio. 

Cyber Security

• Palo Alto Network (PANW): Once of the best cyber security companies. 

High Risk

These are high risk but has lots of potential.

• Semiconductor Bull (SOXL) 
• Micro Sector Feng 3X (FNGU)
• Tesla Bull (TSLL)
• Nvidia Bull (NVDL) 
• Microsoft Bull (MSFU)

Biotech

The biotech stocks are very high risk and highly rewarding depending on how it works. All these stocks have significant potential. However, one must put only those money willing to lose.

• Casava Science (SAVA)
• Reviva Pharmaceutical (RVPH)
• Fortress Biotech (FBIO) 
• Axsome (AXSM)
• Geron (GERN)

Two trump card stocks: The below two stock may either go boom this year or get busted. I will not all be surprised if they get more than doubled or worst case fail completely. 

• Plug Power (PULG)
• STEM Inc (STEM)

Other Core Stocks

• Apple (AAPL): Part of my blog portfolio. 
• Google (GOOG): Part of my blog portfolio.
• Master Card (MA): Part of my blog portfolio.
• META: Part of my blog portfolio.
• Netflix (NFLX)
• Shopify (SHOP): Part of my blog portfolio.

Earnings projections for 2023-2024

Q1 2023: -2.1%  

Q2 2023: -5.2%

Q3 2023: 4.3% vs. -0.3% 

Q4 2023: earnings +2.4% (projected)

Q1 2024: earnings +6.8% (projected)

Q2 2024: earnings +10.8% (projected)

FY 2024: earnings +11.8% (projected)

Revenue growth for 2024 expected: 4-5%.

Based on the above table, finally earnings recession have ended. It’s expected that earnings and revenue growth will continue to rise. 

Sectorial Stock Market Performances - TOP sectors for 2023

Sector	YTD Performance in %
Information Technology (TOP)	56.39
Communication Services	54.36
Consumer Discretionary	41.04
Industrial	16.04
Materials	10.23
Utilities (Worst)	-10.20

Please click below link to view complete sectorial performances:

https://www.barchart.com/stocks/sectors/rankings?timeFrame=Ytd

Source: barchart.com

Is it worth Investing in India?

The National Stock Exchange Nifty 50 Index went up about 19% in 2023 to log its best years since 2021 and second-best since 2017. Most of these investments can be attributed to stable government. Prime Ministers Narender Modi’s friendly foreign policy and investor’s friendly environment, powered by sustained domestic mutual fund inflows, the return of foreign buying, better-than-expected macroeconomic growth and steady corporate earnings have all contributed to the stock market performance. In addition, India has become the investment hub for big companies like Apple, Microsoft, Google, Amazon etc. Based on the latest report Tesla is moving closer to officially unveiling its long rumored India manufacturing plant in early 2024. China’s loss has been India’s gain. Hence, I believe Indian economy and stock market to continue to grow for a foreseeable period of time. Recently the National Stock Exchange of India (NSI) surpassed Hong Kong stock exchange as the market value went past $4 trillion to become world’s seventh largest exchange . So, investing in India may be a good idea for long term. The only problem I perceive with many Indian companies is still lack of professionalism, particularly in the financial sector. 

Now let me discuss this month’s stock picks for my Blog Portfolio. I am adding two tech titans to this month’s blog portfolio: Microsoft (MSFT) and Intel (INTC).

Microsoft (MSFT): Microsoft Corporation develops and supports software, services, devices and solutions worldwide. It has huge number of products such as Microsoft office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions etc. The company was founded in 1975 by Bill Gates and is headquartered in Redmond, Washington.

A case for Microsoft

Any one knows computer must be knowing Microsoft. So, I would not like to write much about the company. In brief, Microsoft is the number one software company of the world with an annual revenue of $144 billion. The company had a stellar 2023 and had handsome return for the shareholders. I think it’s the beginning of second innings for Microsoft. It may be surprising when I say second innings because a new chapter that has emerged known as “Artificial Intelligence”. Microsoft is expected to be one of the major beneficiary of the AI growth. 

I did not like Microsoft stock and most of the time though as over-valued. However, there are a few reasons why I am excited about Microsoft now:

• Microsoft is expected to be one of the major beneficiary of the AI growth. Because it has humongous user base and huge product lines. All these will gradually transition towards UI usage to increase productivity and reduce cost. Every corporation would like to increase their revenue and profit using AI, that will necessitate investment into technology. This is going to help Microsoft to further increase its revenue and profit. 
• We should see continues interest of investors in AI, software, semiconductor stocks as IT budget ramp up in early 2024. We may also see PC upgrade ‘supercycle’ and uptick in gaming activities. Generative Al should see major capital-spending among cloud providers, enterprise and continued data center growth. Also, we would see more enterprise spending on serves and PCs. That would help MSFT to a large extent.
• Microsoft has 49% stake in OpenAI (the maker of Generative AI - ChatGPT). I am anticipating it’s highly likely that OpenAI will go public this year. If so, that should be a great source of money making for the company.
• Microsoft has already built some generative AI to its products, however if rumors are to be believed the company is planing for its next major software release Windows 12 with generative AI in June 2024. That should further boost its revenue
• Last year was the growth of Semiconductor/chip related to AI. Now for many large companies chips are in place, hence we may see major capital spending by corporate on software with AI capabilities to help them reduce costs increase revenue and profits.
• The gaming industry is again picking up. As we know, it bought Activision Blizzard in October 2023. That should add it its revenue and profit.
• During the last quarter earnings call, CEO Satya Nadella said “we are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.”. It indicates we are going to see AI across all product lines from Microsoft.

Financials

During its Q1 FY24 earnings on October 24, Microsoft reported Revenue of $56.5 billion, up 13% and net income of $22.3 billion, up 27%. What it means is that, despite being a huge company it’s still able to generate mid double digit revenue and 27% earnings. This is truly fantastic. Now let’s see the fundamentals.

Company Fundamentals

Market Capitalization	$2.79T	Total Cash	$143.95B
Trailing P/E	36.44	Total Debt	$105.68M
Forward P/E	33.67	Book Value per share	29.7
Price/Sales	12.86	52 weeks high	384.3
Revenue	218.31B	52 weeks low	219.25
Quarterly Revenue Growth (YOY)	12.80%	52 weeks change	56.96%
Gross Profit	N/A	Held by Institutions	73.21%
Net Profit	$77.1B	Held by insiders	0.05%
Quarterly Earnings Growth (YOY)	27%	Float	7.43B
EPS	10.34	Dividend	0.75%

The stock may look little expensive from P/E ratio perspective, however if we look into Price/Sales (P/S) ratio it looks reasonably priced.

My View

The stocks currently trading at $376.04 and near its all-time high. Also, looking to the above fundamental, the stock is not cheap. The stock has a all-time high of $384.30. Currently, the stock is consolidating and it seems institutions have been accumulating. The market cap has reached $2.7T (second to Apple). It has become too big and little expensive for growth. I do not see a significant uptick till the next earnings. Because investors my be willing to watch how the AI helps the company generate revenue and profit. Once investors see the real growth the stock will again pickup momentum. But the key will be the IPO of ChatGPT. The company will be one of the key beneficiary of future AI growth. Hence, despite its higher valuation, I have added the the stock or other leverage instruments. It’s highly likely that unless Apple comes out with any new product, I expect Microsoft to become the #1 company in market cap this year. Hence, my investment is more in MSFU (Microsoft bull). 

Risks

All equities carries risks. Microsoft is not immune to market downturn or other unforeseen reason. However, it’s a power house and has dominance in many product lines. So, the risk  is much less comparing to many other technology stocks. I was not a big fan of Microsoft but things are changing and I see growth and value in this company, particularly after AI shift and its share in ChatGPT.

My final thought: As I have written in my previous blogs, the growth of AI is just the beginning and may go for many years. Microsoft will be gaining from AI growth. Furthermore, its investment in OpenAI (ChatGPT) may have significant benefits for the company.  I feel it as a great longterm investment though nothing can be guaranteed. So, I feel there is further chances of growth despite being a $2.7T company. However, if I see any read flag or stagnation then I will pull the trigger because I do not fall in love with any stock or company.

Intel (INTC): 

Intel Corporation designs, develops, manufactures, markets, and sells computing and related products worldwide. It has multiple product lines Client Computing, Data Center and AI, Network and Edge, Mobileye, Accelerated Computing Systems and Graphics to name a few. The company was incorporated in 1968 and is headquartered in Santa Clara, California. Intel was a dominant player in chip manufacturing but the company has been struggling since last two, three years. But the time is changing and good time seems to be coming for Intel. 

A recap of Chip Shortage: In 2020 when COVID pandemic started it blew all the global supply chains and there were huge shortage of chips for a couple of years. That also taught a lesson to American corporations that there is nothing cheap about not knowing if critical production inputs will arrive on time. Corporate America was too much dependent on China and many other nations to get the stuff cheaper. However, the corporate world and U.S government learned that broken supply chains can cause crippling production delays, multibillion-dollar losses, and/or lost market share. Moreover, the low supply and higher demand increased the prices and so goes inflation. Hence, on August 9, 2022 the CHIPS and Science Act was signed into law by President Joe Biden to authorize about $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the United States and providing subsidies to the chip manufactures. 

Why Intel? Visualizing all these chips demand and chip shortages Intel came with some mega plans to setup chip manufacturing plant in U.S to cater the indigenous and global needs. The company is also expected to get lots of subsidies from U.S. government chip act. It’s setting up several plant in US as below:

• Arizona, U.S: Production planned to start this year.
• Ohio, U.S: Production planned to start this 2024-2025.
• Penang, Malaysia: Production planned to start this year
• A few days ago, Israel’s government agreed to give Intel a $3.2 billion grant for a new $25 billion chip factory in Tel Aviv.

With so many chip plants coming online soon, Intel is in one of the most strongest position to take advantage of the chips demand. Also, as I said earlier, we should also see PC upgrade ‘supercycle’ that should significantly help the company to gain further momentum. In December the company launched its Gaudi3, an artificial intelligence chip for generative AI software. This product will be available this year and will compete with Nvidia and AMD. In addition, it announced Core Ultra chips, designed for Windows laptops and PCs, and new fifth-generation Xeon server chips. Both include a specialized AI part called an NPU that can be used to run AI programs faster. The ultra processors is available in some new laptops from Dell, Google Chromebook, HP and Microsoft Surface.

Financials

During its last quarter (Q3) the company reported solid earnings and revenue beating Wall Street expectations. Earnings came at 41 cents vs. 22 cents expected and Revenue was $14.16 billion versus $13.53 billion expected. For Q4, Intel guided earnings of 23 cents per share, on a revenue of $14.6 billion and $15.6 billion vs. expectations of 32 cents and $14.31 billion. What it means is that, Intel is gaining momentum and I am hoping to see a major turnaround. The company plan to cut costs by about $3 billion this year and its earnings per share (EPS) should be benefited. The company is controlling expenses, with operating expenses declining 15% from a year ago. Now let’s see the fundamentals.

Company Fundamentals

Market Capitalization	$211.85B	Total Cash	$25.03B
Trailing P/E	N/A	Total Debt	$48.88B
Forward P/E	27.78	Book Value per share	24.15
Price/Sales	3.96	52 weeks high	51.28
Revenue	52.86B	52 weeks low	24.73
Quarterly Revenue Growth (YOY)	-7.70%	52 weeks change	87.99%
Gross Profit	26.87B	Held by Institutions	65.93%
Net Profit	-1.64B	Held by insiders	0.06%
Quarterly Earnings Growth (YOY)	-70.90%	Float	4.21B
EPS	-0.41	Dividend	0.99%

My View

I was never a big fan of Intel because it kept losing revenue and profits for last few yers. Moreover, I felt it like a cyclical stock. But now that many chip plants are being built and some of those are expected to go online in 2024 and its recently released AI chips, we should see good time ahead. That’s what excited me a few months ago and started buying its shares. Just to note, the share prices have gone up 96% this year. Having said that, I believe Intel has big room for growth. The stock is currently trading at $50.25 and at the 52-week high. So, it’s no more cheaper. However, the stock has a all-time high of about $75 in the year 2000. I believe if the company can deliver without delay then this stock can march towards a new all-time high.

Risks

As we know, all equities carries risks and none of the stock is immune to market volatility. However, Intel is reasonably priced and have 1.94% dividend. Furthermore, chip demands particularly new PC/Server upgrades and AI should continue to do well. Hence, I believe it’s worth taking some calculated risk. But as I have said before, if I see any read flag or stagnation then I will pull the trigger as I do not fall in love with any stock.

My final thoughts: Visualizing new plants coming, AI chips, PC, Laptop, server upgrades; it’s very likely that Intel should be benefited. Also, it’s not a highly volatile stock and has reasonable dividend. Hence, I decided to add to my blog portfolio.

Shesa’s Blog Portfolio (As of JAN 1, 2024)

Equity	Suggested Price	Current Price	Suggested Date	% Change	My View  (see disclaimer)
STOCK (All prices are in USD)
AAPL	12.9	192.53	1/25/13	1392%	HOLD
META	47	353.96	11/13/13	653%	HOLD
MA	77.18	426.51	12/12/13	453%	HOLD
AMZN	15.58	151.94	4/12/14	875%	BUY/ Accumulate
SHOP	13.48	77.9	11/25/18	478%	HOLD
SPG	54.59	142.64	5/25/20	161%	HOLD
ENPH	45.3	132.14	6/28/20	192%	Accumulate
PLUG	27.98	4.5	4/25/21	-84%	HOLD till earnings
SAVA	51.49	22.27	10/10/21	-57%	BUY/ Accumulate
NVDA	239.49	495.22	2/13/22	107%	Accumulate - Long Term
TSLA	290.25	248.48	5/1/22	-14%	Accumulate - Long Term
ABNB	115.21	136.14	10/31/22	18%	HOLD
AXSM	77.13	79.59	1/1/23	3%	BUY/Accumulate
STEM	8.30	3.88	2/20/23	-53%	HOLD till earnings
RDFN	8.87	10.32	4/6/23	16%	BUY/Accumulate
SOXL	15.66	31.4	4/6/23	101%	BUY
GOOG	123.25	140.93	5/21/23	14%	HOLD
RVPH	7.3	5.15	5/21/23	-29%	BUY/Accumulate
AI	33.39	29.31	6/25/23	-12%	SOLD
LAZR	5.57	3.37	8/27/23	-39%	BUY/Accumulate
PATH	15.39	24.84	10/15/23	61%	BUY
PLTR	20.49	17.17	11/19/23	-16%	BUY/Accumulate
MSFT	376.04	376.04	1/1/24	0%	NEW ADDITION
INTC	50.25	50.25	1/1/24	0%	NEW ADDITION
ETF
IHF	139.1	266.55	8/16/15	92%	HOLD
MUTUAL FUND
PRMTX	59.45	119.52	12/20/14	101%	HOLD
FSRPX	9.05	18.76	1/15/16	107%	HOLD
FSMEX	43.66	61.96	9/24/17	42%	HOLD

Equity Sold since my Last Blog

• Fisker (FSR)
• C3.ai (AI)

Disclaimer: This blog is meant to provide my opinion only. The information provided is to the best of my knowledge but may not be accurate. I do NOT provide any professional recommendation to buy/sell any stock, ETF, mutual fund, or any other security(s). As an investor, it’s your hard-earned money and you decide what is best for you. The above are merely my own opinions on what I do. Please contact a professional money manager to buy/sell any security. I do not charge any fees or commission by writing the blog except anything from Google AdSense. I have position(s) on whatever security I put on my blog portfolio and avoid including any security that I do not own or follow. Anyone buying or selling the equities mentioned here must do at their own risk.

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